Nice Work If You Can Get It: The Software Industry as a Model for Tomorrow's Jobs

Some high-tech firms are redefining the relationship between employer and employee.

The requiem for jobs and careers as the American middle class has known them has already sounded. Some purveyors of career advice claim that "jobs" are increasingly obsolete; instead, people will perform tasks on a project-by-project basis under short-term contracts. They liken workers to free agents in professional sports. Or they invoke Hollywood to describe future careers: teams assembled for particular ventures that will readily move on to the next one, carrying their security with them via their reputations and network of contacts.

Hype aside, there is a grain of truth in these images. Today's good jobs are different from those of memory and nostalgia, as I found recently in a national study of local challenges in the global economy. The software and related knowledge industries are inventing a new kind of career with profound implications for the way we work and live. As companies in these industries must adapt to relentless change, so too must their employees adapt to change in their own work lives. Instead of counting on long-term employment with a single firm, they increasingly depend on their employability by many firms. The shift from employment security to employability security implies a fundamental change in what people should expect from their employers--and how employers should think about their interests and obligations. To be sure, many other industries are not as volatile or growing as rapidly as the software and other technology industries, and not every job will follow the same pattern. But software holds important lessons for other industries undergoing change and may presage the expanding labor markets of the future.

THE SCOPE OF CHANGE

My collaborators and I surveyed 2,655 companies of all sizes and types in five metropolitan areas, interviewed in depth leaders of nearly 100 businesses and community organizations, and ran nearly 40 2-to-3-hour focus groups with more than 300 workers in diverse companies discussing their reactions to workplace change. Everywhere we looked, the forces for change were similar: intensified competition, use of new technology, and pressures for lower cost, higher quality, and greater speed. Larger firms were consolidating their operations and their supply relationships on a national and even global basis, with grave implications for local purchasing and employment. Smaller ones were seeking partners and joining networks to tap new international markets--or simply to survive. And a majority of all companies reported embracing a new organizational model that involves fewer layers, more use of problem-solving teams, and greater outsourcing--that is, more reliance on outside suppliers for what used to be internal services.

In Boston and Seattle, the two areas in the survey with the highest concentration of technology companies with high-wage jobs, change was the most marked, and the extent especially noteworthy the larger the organization. Unsurprisingly, the most common changes involved closer relationships with customers and accelerated product development (characteristic of almost 65 percent of companies); reorganization of work processes was next, underway in 46 percent of firms. Nearly all managers at larger companies reported adding information systems to improve efficiency.

Almost a third of responding companies (31.7 percent) had changed their relationships with suppliers, asking vendors to perform to higher standards and provide more services as companies outsourced them. For a group of 42 larger Boston companies interviewed, the most commonly outsourced activities were low-value-added services such as cafeteria, payroll, cleaning services, building and equipment maintenance, mailroom, security, travel, public relations, child care, training, technical writing, and printing. In addition, eight of those companies used so many temporary workers that they had created their own in-house temp pools.

The remaining workforce faced heavier workloads, greater work pressure, and escalating skill requirements (computers, numeracy, problem-solving skills, knowledge of other functions). Many companies were expecting workers to handle more responsibilities; 30 percent of those in the survey reported they had already reduced supervision and created problem-solving teams, and 44 percent said they were planning to do so. Demands for greater skill were found across industries. Pattern cutters, telephone operators, meter readers, hamburger flippers, and taxi dispatchers were joining factory workers in being expected to use computers. Merlin Metalwork's 30 workers manufacturing titanium bicycles used computers to schedule their work and track performance, just as thousands of operators in Gillette's South Boston plant did.

As a consequence of organizational change, workers in focus groups express great uncertainty about the future. "I don't believe jobs are secure anymore," a limousine dispatcher said. "People in remote locations make decisions that drop the bottom out of the whole job market. That's true no matter what job you have. Someone somewhere else can kill it." When asked what they will be doing in three to five years, most people said they could not think beyond today.

Workers often attribute insecurity to corporate downsizing and failing businesses. But much uncertainty about jobs stems from changing job requirements, and change is associated with successful companies, not failing ones. The extent of workplace change was positively correlated with both sales growth and international market expansion in my survey. Greater use of contingent workers--that is, temps, part-timers, independent contractors--prevails even in companies enjoying employment growth in emerging technology fields. In fact, such companies are especially reliant on contingent employees. A related survey by Coopers & Lybrand of 392 companies identified in the media as the fastest-growing U.S. businesses found that 65 percent of them outsourced, and those 65 percent had revenues that were 22 percent greater than the others.

And now we come back to the Hollywood and professional-sports model of careers. Old-style employment security is declining, but leaders of the knowledge industries say they promise employability security. Employability security is based on a person's accumulation of human and social capital--skills, reputation, and connections--which can be invested in new opportunities that arise inside and outside the employee's current organization. No matter what changes take place, the theory runs, workers who continually improve their skills and can make their abilities known through a network of firms are in a better position to find employment--with the current employer, with another one, or on their own.

Is employability security just a theory? It seems like a pipe dream to people with obsolete skills in declining or slow-growing industries, who face greater risks without corresponding opportunities. But to knowledge workers in growth industries, it represents reality.

The modern incarnation of this labor market has its roots in high-technology areas such as Silicon Valley and Boston's Route 128. In Silicon Valley, as Annalee Saxenian shows in her book Regional Advantage, professionals think of themselves as employed by the industry, with careers that typically extend across many organizations. Changing employers is so common that professionals may identify their interests more with the project and the industry than with the particular firm where they happen to be. Such regional networks now exist in many different industries across the country. For example, according to UCLA management professor William Ouchi, now chief of staff for Los Angeles Mayor Richard Riordan, 4,500 multimedia companies in Los Angeles act as a network of overlapping projects in which people and ideas move from node to node.

SOFTWARE GYPSIES

The software industry represents a fully developed example of the new career model, offering potential solutions to the problems of contingent jobs. It is important because of its centrality to the information economy; computer programming is the fastest-growing large occupational category. Software production, a growth industry, spans traditional industrial categories: classified with service industries, yet manufacturing packaged products. Nationwide, the industry employs about 2.5 million people. In Massachusetts alone there are over 1,800 software companies employing more than 62,000 people, with another 33,000 working in software units of computer hardware companies and a comparable number in software-based telecommunications network equipment companies. Almost a third of those employed in software do what can be broadly described as "knowledge creation."

To respond to rapid change and cutthroat competition, software companies need constant innovation, and that means constant workplace flux. "This is war, make no mistake about it," one executive observes. So the future of any job is highly uncertain. ISI Systems, which says it was "a virtual company before anyone ever used the word," produces insurance-processing software. In a chain typical in knowledge industries, large insurers contract with ISI to do claims processing, and ISI in turn outsources its data center. Rather than adding permanent staff, ISI prefers to use "consultants" (read temps) for six or nine months at a time when business builds up, to avoid having to lay off staff during slower periods.

At Powersoft, which manufactures client-server programming tools, development and support staffers recognize that the company's success depends on constant improvement, even if that means that "every three days we're changing the rules." This turbulent environment creates cross-cutting pressures--at one time, for example, layoffs of people without transferable skills in a unit shutting down and a hectic search for people to build new development operations. "I was firing people in the morning and hiring people in the afternoon," recalls Traci Weaver, who heads human resources.

To maintain flexibility, Powersoft has an in-house temporary employment department, Powersoft Temps, for about half the temp pool the company uses. This gives Powersoft control over quality and fosters longer-term relationships with contingent workers. During a recent new product release, for example, 20 temps worked for a month entering data, taking orders, and sending out invoices. Some eventually got regular jobs.

Despite great uncertainty, people at Powersoft sound eerily like manuals for the new self-reliant career, though this is not a young or inexperienced crowd following the latest hip career cliche. The average age is 35, and everyone we met had worked for other companies, giving them a reference point for their reactions to Powersoft. They talk about "earning the right to come back" because "no one is owed a job; sorry, pal." They report that the challenge of a demanding technology provides "unparalleled opportunities to grow within myself." They applaud each other's dedication, joking about the long hours.

For example, when a senior manager in one of my focus groups referred to an "ethic that is far and above 8-to-5," a colleague quipped, "Only a half-day?" The first replied, "That's 8 p.m. to 5 p.m." Another chimed in, "This is like a poker game. I'll see you your hours and raise you." Then a fourth made a serious point: "In this environment, second best just doesn't cut it. We all challenge each other. The long hours aren't because we want to outshine everybody; we want to keep up with everybody."

Experience has taught people not to count on the company but on their ability to move. It's not that they want to be gypsies; most want to settle down. "It's an exciting environment, which makes you very attached to the company," a professional said. "You spend so many hours that it's hard to cut those roots and move on." But they will move if they have to. "I was at Digital when it was a fun place; I was at Prime when it was a prime place to work," another employee recalled. "Both times I got out before it was fashionable. I wouldn't hesitate to jump again if I see lifeboats being lowered."

Powersoft's people agree that the next years are highly uncertain, but they imagine a variety of possibilities with no ceilings or barriers. One group of professionals bantered about who would take whose job and who would be president someday. Workers further down the Powersoft pecking order can also dream about a future doing something different that uses the learning in which they are investing; for example, the frontline technical support staffer who thinks he'll be in a better job because he's also a part-time instructor at a local college, or the clerical worker who wants to go to any Powersoft overseas office. They say that it is their own choice whether to stay or leave. Several said they hope they want to be at Powersoft in the future.

PRODUCING EMPLOYABILITY SECURITY

Employability security in the software industry is built around four factors. These are characteristic of successful high-technology firms and increasingly important for competitiveness in all high-wage industries.

Innovation for world markets. Many software companies share a goal of innovation on a world scale. Ever-shorter lead times in software mean that only the best survive; the competitive edge comes from setting world standards to leapfrog competitors with products that cross borders easily. "Technology is a global business," one CEO said. "We must get critical mass around the world faster and faster to become a standard. Competitive leads last a very short time. The minute you poke your head out in the leadership position, everybody is after you." For this reason, Lightbridge's incentive compensation plan for the entire staff includes bonuses for innovation as well as customer satisfaction and system performance.

Very new and very small companies are born global. The MathWorks, a company with nearly 300 employees, was international in scope from its founding in 1984. An early user of the Internet to make worldwide connections, The MathWorks developed some of its products through international collaborations. Product features and extensions were developed by independent professionals in Sweden, France, and South Africa.

International reach is now a necessity even to sell products at home. Powersoft, for example, must support corporate customers wherever they are. Powersoft began selling overseas as soon as its first major product was ready in 1990; by 1994, it had distribution joint ventures in 44 countries. World markets also provide a large customer base and a hedge against business cycles at home. And meeting or setting world standards means that people will be highly desirable to other companies. Product or project success is more important than company success. One experienced software gypsy, now a manager at a $50 million venture, reported, "The thing I always tell everybody is that while we want our company to succeed, more importantly, we want the platform that we're running on to succeed. So if this company crashes and burns, we can go somewhere else and leverage what we did here." In short, workers in software want to make sure that their knowledge is transferable.

An emphasis on learning. Rapid technological change poses a challenge: how to ensure that new knowledge constantly enters the organization and that people have skills for both today's and tomorrow's work. Without new knowledge, software companies fall behind. Unless they are continually encouraged to learn, employees become obsolete with each new technological wave. An ISI marketing manager reported that customers "are not buying today's system, they're buying the system as it goes into the future. So therefore what we really offer is what's in the brains of the people you see wandering around this building."

Software executives recognize these imperatives. Lightbridge, founded by Pam Reeve in 1989 and now employing 430 people, includes the desire to be a "learning organization" as one of the "organizational first principles" in its mission statement. Managers set goals for education, and the company offers abundant courses in project management, time management, and software development techniques as well as featuring a large library, unusual in such a small company. The culture encourages dissemination of new information within the firm. Like others in the industry, Lightbridge has a full tuition-reimbursement program. Performance reviews ask employees to specify what they plan to do to expand their abilities.

Similar practices characterize Lau Technologies, a $50 million custom electronic systems manufacturer founded by Joanna Lau when she and other employees bought out their unit of a stagnating defense contractor. Twenty-one of the 209 employees own the company, and 48 others participate in a profit-sharing pool. Lau's associates feel their advancement depends on their own commitment to improving their skills and using them. Employees receive seven days of total quality management training, extensive technical training in electronics and computers, and full tuition reimbursement for outside courses. They are cross-trained to perform multiple tasks, and managers conduct an annual training analysis of each employee and develop customized programs based on employee preference. And there is "buddy" training, in which a master trainer in each field trains others. Slow periods between contracts are used for worker training. Spending money on training assuages employee fears; it is a sign that Lau expects continuing work.

Company self-interest in "having the latest technologies within our grasp," as an executive put it, merges with individual interest in having marketable skills. Companies want software workers to become industry experts who can support customers that use other application software; Hewlett-Packard ads tout its staff's ability to work on any other company's equipment. Firm-specific knowledge may be less important to job success than broad knowledge of many companies' offerings.

Flexibility and empowerment: reward for initiative. Often no more than buzzwords, flexibility and empowerment take on meaning in software companies where people feel they have some real control. ISI has long encouraged flexible hours. Managers can authorize any schedule and do so for people whose knowledge is valuable--for example, having a new mother work two days a week, or giving a PC to a woman moving from Massachusetts to North Carolina with her husband so she can remain full-time on the ISI payroll. At Powersoft, employees can design their own three-day, four-day, or five-day altered-schedule work weeks and can work from home, linked through company-supplied computers, electronic mail, and fax machines. Most human resource staff work at home at least half the time, including a full-time recruiter who spends evenings talking with prospective hires after their work hours.

Rewarding entrepreneurial initiative helps both employer and employee. New ideas help the company improve and help the person gain a reputation, rise to leadership, and invent new opportunities. FasTech Integration, a producer of networking software, encourages employees to identify new projects; if a project is accepted, the employee, regardless of formal level, can become the project manager--in FasTech jargon, the "DRI" or "designated responsible individual." In the last year, almost a third of its 125 employees took on such opportunities.

Company and industry networking. In software, as in other high-tech fields, rapid technical change produces complex relationships among organizations. Development projects spill across organizational lines, and engineers and managers find their careers enmeshed in more than one firm. A job for one company may be managed by another; training may be done by still another organization; and people working in several organizations may assess an employee's performance. As partnerships and project teams change, people become acquainted with organizations outside their own. Sociologists Arthur Stinchcombe and Carol Heimer argue that such organizational interdependencies improve workers' chances to find future jobs.

Numerous ties with development partners, marketing allies, and industry collaborators not only improve the products of software companies; they also allow small start-ups to recruit or tap sophisticated talent. Echoing a common theme, Joe Alsop, the CEO of Progress Software, attributed the company's rapid growth to alliances. Outstanding people were willing to take a risk with a start-up because of the connections they would get with leading companies in the industry.

FasTech Integration's development partnerships and marketing relationships have been critical to its success. With 125 people, the company is far from a giant, but its reach extends to tens of thousands of people working in its interest at the biggest firms in computing as well as at dozens of "ISVs"--independent software vendors. External collaboration is widespread in software because products are more appealing when they work easily with programs from other companies, and each company's reach is greater when it can tap into many distribution and support networks. No one single company, not even Microsoft, can provide users with all the services and applications they want.

Powersoft, for example, has 200 partnerships with complementary companies to integrate its PowerBuilder tool with other programs. Big names in computing--IBM, Digital, Novell, Hewlett-Packard, Microsoft, Oracle, and Knowledgware--are partners as well as competitors. For marketing, Powersoft has partnerships with almost 100 resellers affectionately known as "power channels"--consultants, systems integrators, and project developers in the client-server industry, which together account for 55 percent of its North American sales. Dun and Bradstreet alone has 600 developers working on PowerBuilder applications.

The industry's formal associations are another source of local connection-making and job referrals. In 1985 the Massachusetts Computer Software Council was formed by two entrepreneurs to promote the industry domestically and internationally. Today the Software Council runs 27 meetings a year for its 300 companies on international opportunities, legal issues, sales and marketing strategies, or CEO-to-CEO advice; it also has its own rock band.

The Software Council serves as a job broker as well as industry booster. Its fellowship program is a public-private partnership with MassJobs to retrain seasoned professionals who have been laid off from hardware, defense, or electronics companies and place them in five-month work assignments in software companies. Resumes and testimonials about each candidate are then circulated throughout the network. For example, Zena Thomas, former project manager and systems analyst at Wang Laboratories, took an assignment as quality assurance consultant for Relational Courseware of Boston; another Wang veteran, Sandra Hayes, created a company identity and marketing materials for Coptech.

Many companies report that they take advantage of local industry networks to identify good people and ideas through contact and conversation among companies, facilitated by the Software Council and led by CEOs. "I am Powersoft's chief schmoozer," Powersoft's founder and CEO Mitchell Kertzman says. So much industry "schmoozing" takes place that some software veterans complain it eats into their private lives. But the result is that people employed in software see their career routes extending throughout the industry. Employability security derives from relationships outside the company issuing the paycheck as well as from performance within it, and it is a matter of industry organization as well as personal enterprise.

LESSONS FROM SOFTWARE

This version of the future is alive and reasonably well in software, telecommunications technology, multimedia, biotechnology, and health technologies--wherever brains power the enterprise and workers think of themselves not as employees but as professionals temporarily linked to a particular company and someday entrepreneurs founding their own. Blurring of traditional distinctions might characterize many jobs and careers of the future. People might be workers one day, perform management tasks the next, and run their own businesses on the side.

But this model comes with limits. It is not surprising that people feel good in software today; they can joke about contingent careers because the jobs exist. The industry is growing rapidly, and American companies dominate world markets. The industry doesn't depend on many fixed assets; people and their ideas are primary. The need to attract those with the latest knowledge makes it easy for talented professionals to feel there is always another opportunity if the current job doesn't pan out. Playing with computers is a young person's game, and the young are often convinced the future will take care of itself; Apple reached a billion dollars in sales before it had a pension plan. Furthermore, the boom in software arose as hardware manufacturers hit hard times; exiles from moribund computer companies are grateful for a job and not picky about whether that job leads to a secure career or whether they will be on the street again at age 55. Hollywood-type careers work fine until one is a fading star.

The industry is still in an entrepreneurial phase characterized by easy entry and a large number of business start-ups, many still invisible to the public. Marketing channels are relatively open; even my teenage son has started a software development business and sells programs through the Internet. But what happens when the industry matures and consolidates? Sybase's acquisition of Powersoft early in 1995 for $904 million in stock, one of the industry's largest deals to date, was dwarfed just a few months later by IBM's $3 billion acquisition of Lotus. Will loose networks be replaced by big bureaucracies? What will this do to the primacy of people? Unlike major-league ballplayers and movie stars--whose work lives have become metaphors for the new career model--software talent is not represented by unions or agents. People might be in a weak bargaining position with giant companies, and even more vulnerable when they are not engineers and programmers but telemarketers or production workers that shrink-wrap software packages.

Yet, as contingent employment spreads, the software industry offers useful ideas for labor market policy even in older industries. More companies can be encouraged to emulate practices of software companies that are, after all, just reflections of progressive human resource policies long characteristic of older high-tech success stories such as Hewlett-Packard. At many firms, however, there is much more talk than action; not enough reach the Hewlett-Packard standard. One aerospace company that benchmarked its training hours against Hewlett-Packard, Motorola, and others known for education found that it had offered less than half of what the progressive firms did and that its training had been pegged more to job changes than to continuous learning. Many companies limit training to classrooms at infrequent intervals, instead of using the full panoply of on-the-job learning practices of Lau Technologies or the rapid communication of new ideas via e-mail and frequent workplace meetings common in software companies. To convert "training" (doing something to the person) into "learning" (a constant reaching out for new knowledge) requires embedding it in the workplace.

To serve the workforce beyond a few progressive high-tech firms, public policy needs to encourage continuous upgrading of skills. Training is in the interest of the firm--but not just the firm. Because of the increased mobility of workers among companies, training is a general resource for an industry and region. The divergence between the interests of individual firms and society's broader interest in a high-skill workforce is a classic example of the rationale for public action. The more we rely on employability security rather than long-term employment by a single firm, the more important such social support for training and education become.

National and regional policy should also encourage (although not directly finance) the development of networks of collaboration that help workers as well as firms. Local collaboratives, such as the Peer Learning Network in Nashville, help companies offer training, compare best practices, share success stories, and provide internships across the network. Civic or industry associations such as Chambers of Commerce can help form the networks, with local universities and the community supplying educational programs. The primary movers here should be companies and local industry associations that permit a flow of people and ideas. Companies can view their network of suppliers, customers, and venture partners as a resource for learning, personnel exchanges, or job placements. For example, a prominent large manufacturer that works with suppliers as partners has now started to ask some of them to take on workers temporarily as an alternative to layoffs. Support for internal and external entrepreneurship--new ventures and spin-off businesses around promising ideas that the established company cannot use--can help people create their own opportunities for employment.

The software model encourages employers and employees alike to think globally. In every industry I know, people now recognize that they have to think more globally, innovating to world standards. Even the U.S. apparel industry is enjoying something of a comeback after being driven out of business by low-wage Asian and Caribbean competitors. Smaller niche apparel companies in the U.S. now flourish through innovation, global thinking, sophisticated applications of technology, and very close relations to a few large customers for whom they promise quick turnaround and customized products manufactured to very high-quality standards. When companies grow outside of their home market and set world standards, local workers can benefit--like the Nynex telephone installer who told me that the thing he likes best about the company is its operations in England, not because he would be sent there but because he felt his future is more secure in a company expanding internationally. While some workers blame the global economy for workplace changes and fight against it, software professionals believe that their employability is enhanced by the strength of their company--and of the American software industry--in global markets.

Software and its sister knowledge industries should show us, above all, that employability is not just a matter of individual skills and education. It also rests on institutional factors, especially on industries that are highly organized and networked, to permit a flow of people across opportunities. Training alone does not produce it, nor can individuals be expected to innovate their own way into good jobs unless companies have built their own network of collaborations and created an environment that rewards initiative.